It's that time of the year again...yep, it's Fall! You know how
I can tell? The gourds and dried corn stalks (and don't we all love
to decorate everything--including our cars--with gourds and corn
stalks?) have appeared at the farmer's market, I've begun to stress
out about finding the perfect Halloween costume and my neighbor
across the street has put up his "scary" yard decorations. On
second thought, maybe he's really having a yard sale because it
just looks like a bunch of dusty stuff from his attic. That has to
be the case, because what does a seesaw have to do with Halloween
Regardless of what my wacky neighbor is up to, watching those red,
yellow and brown leaves fall from trees and feeling those cool,
crisp evenings remind me of the stock market. And don't they remind
everyone of the market? If they don't, then you're clearly not a
market historian, nor did you read my article from last year:
Goblins, Ghouls, and the Halloween Effect.
I'm sure everyone has heard the investing adage: "Sell in May and
Go Away," but perhaps what you haven't heard is when to come back.
Well now's the time! Research has shown that you could improve your
annual average return by 4-8% by simply being in the stock market
from late October through April and avoiding the other months.
Let's Add a Dash of Smarts
Most of the research surrounding the Sell in May and Halloween
Effect focuses on buying futures or ETFs to capture the optimal
time to be in the market. But instead of simply buying the entire
farm, let's buy the best cow, horse, chicken, gourd and dried corn
stalk the farmer has. We only want the best he has to offer. Why
waste our time buying the entire lot which also contains a few
duds. The same holds true for the stock market. Why would you want
to buy all the stocks in an index or an ETF when some are going to
outperform others? Don't you simply want the best?
That scream you just heard wasn't the zombie under your bed (he
actually makes more of a groaning sound). That scream was a
resounding "Yes!" shouted out by investors around the world who
want only the best stocks. A lot of questions generally follow a
scream. So after you shout "Yes!" you're probably going to ask "But
how do we separate the wheat from the chaff?"
How to Find the Best
Zacks Research Wizard
is your one-stop shop. It contains information on corporate
financial statements, stock prices, earnings estimates and stock
ratings on thousands of companies--all at your finger tips. There
are very few software programs available to the individual investor
that has all the information and history that the Research Wizard
has. What's more, you can actually backtest your ideas to see what
works and what doesn't. That's a priceless feature that will save
you a significant amount of tuition from the School of Hard-Knocks.
Here's a way to use the Research Wizard to find some of the
- First, create a liquid, investible set of the stocks with
the largest 3000 market values
average daily trading volume greater than or equal to
(if there's not enough liquidity, it'll be hard for you to
- Because a lot of stocks under a certain price are difficult
to trade, keep
only those stocks trading above $5/share.
- Add another filter by selecting only those stocks with
Zacks Rank less than or equal to 2.
(Any Zacks Rank 3 or greater is either at or under market
- Let's also require the company to have an
average broker rating better than a 2.
(It's good for Street research to also think the stock is a good
- Finally, we'll select those stocks with the best
Enterprise Value/EBITDA Ratio.
(We want the lowest, yet positive EV/EBITDA ratios.)
Here are five of the stocks that passed the screen this week
- Comcast Corporation
Comcast provides entertainment, information, and communication
products and services in the United States and internationally.
This stock has seen great performance over the last 12 months. It's
also a decently profitable company, pays a nice dividend, has good
growth prospects and is still relatively inexpensive compared to
industry peers. Those are all reasons why the stock is rated highly
by the Zacks Rank and Wall Street analysts. Comcast is also
launching innovative products in the on-demand video streaming
- Target Corp.
Target Corporation operates general merchandise stores in the
United States. This is another company that looks strong
fundamentally: solid earnings growth, decent price valuation and
highly rated by analysts. Target has also exceeded earnings
expectations for at least the last seven quarters and has seen
future earnings projections increase for the next fiscal year. This
all adds up to a Zacks Rank Buy.
- LyondellBasell Industries NV
LyondellBassell, a Rotterdam, Holland-based company, manufactures
and sells chemicals and polymers, refines crude oil, produces
gasoline blending components, and develops and licenses
technologies for the production of polymers. This stock has been on
a tear, being up 71% YTD. Yet the stock is cheaper than its
industry averages and the S&P 500. This company also pays a
great dividend. Ten out of fourteen analysts rate this company a
Strong Buy and due to recent increases in earnings estimates, it's
also rated a Buy by the Zacks Rank.
- Prudential Financial, Inc.
Prudential, through its subsidiaries, provides various financial
products and services, including life insurance, annuities,
retirement-related services, mutual funds and investment management
services in the Unites States, Asia, Europe and Latin America. A
company's stock price usually moves in tandem with its earnings
and, given improving earnings estimates, Prudential's stock price
is expected to rise. The company is also relatively undervalued by
most valuation measures.
- Marathon Petroleum Corporation
Marathon engages in refining, transporting and marketing petroleum
products primarily in the United States. This company sees future
earnings projections increasing by over 25% for the next few
quarters. Eight out of nine Wall Street analysts rate Marathon as a
Strong Buy and the other rates it as a Buy. The stock price is up
64% YTD, but current valuations remain low enough to indicate
there's more room for the price to continue its increase.
Thoughtful Stock Picking
Maybe because it's outdoors and most epiphanies occur while doing
something outside, but I think lawn work is the perfect time to
reflect on the most pressing decisions in our lives. So try this.
The next time you're out raking your yard, think about things that
make some stocks better than others. Once inside, grab some paper,
a pen and write down your ideas. Then pour yourself a cup of hot
apple cider, head to your computer and use the
Zacks Research Wizard
to test your ideas.
Starting today, you are invited to do this free of charge. (We'll
provide the software, you provide the hot beverage.) You'll have 14
days to create, tweak and backtest your strategies. At the same
time, you can see the latest picks from pre-loaded winning
strategies that average gains of up to 67.4% per year.
Learn more about your
free trial >>
Let's make some money!
Kip Robbins is a Quantitative Analyst with Zacks.com. He
analyzes screens and strategies for Zacks customers and for use in
Zacks Research Wizard
which empowers individual investors to use market-beating screens,
build their own, and backtest their results.
COMCAST CORP A (CMCSA): Free Stock Analysis
LYONDELLBASEL-A (LYB): Free Stock Analysis
MARATHON PETROL (MPC): Free Stock Analysis
PRUDENTIAL FINL (PRU): Free Stock Analysis
TARGET CORP (TGT): Free Stock Analysis Report
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